“More Subprime and Non-QM Lenders are making their way into Residential Lending”
Many of us in the mortgage broker world have been predicting for a long time that this will keep happening and why not, these lenders charge a higher rate and that is why they are willing to take more risk.
I am not surprised one bit. Most QM lending continues to be more restrictive so all the talk about lending guidelines and restrictions continue to get tougher, not the other way around. It is not one bit shocking that homeownership is at the lowest level in nearly 50 years.
It is often hard for me to recommend some of these types of loan products; rates are higher, much higher in many cases. I recently got a quote for a client where the rate was going to be 7.5% and the loan had a two year prepayment penalty. When I was asked what they should do, I recommended waiting 12 months, working on the credit and getting a much better loan at that time.
This is a bit extreme, as many of them will fall into rates in the 5% to 6% range with terms that are more acceptable and are a good option until we can refinance them out of this kind of loan. No matter what, while we wait to get out of it working on the issues is crucial.
At least there are options and there will be more of them, but also at higher rates.
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Joe Petrowsky, NMLS #6869
Right Trac Financial Group, Inc. NMLS #2709
110 Main St.
Manchester, Ct. 06042
Office: 860 647-7701 x116
Fax: 860 647-8940
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Email: joe@righttracfg.com
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Hi Joe. There is a need for these products. Not everybody falls into the nice neat package that conventional loans require.
Some potential buyers won't have a Joe to explain the risks to them! Thanks for the useful post.
It's tricky as not everyone can qualify for traditional types, and I guess it's good there are other options, but some seem like they've gone a bit too far. In this case, it seems like it would be better to wait.
At least they are available at not unreasonable rates, Joe. They are taking the risk, so it's a good way for them to make some rewards.
Good morning Joe. Even for me those interest rates seem to be excessive. However having said that I wouldn't want to take the risk without some kind of better return on my money. Catch 22
Joe, as they say history repeats itself and I would like to know who is buying these loans on the secondary market??
Good Morning Joe: Unless these lenders have extremely enormous and galactical resources, I will be having the same question as Ginny Gorman 's.
Good morning Joe,
Sounds more like loan sharks but not that low of interest rate. Two year prepayment penalty to make a few extra bucks.
Make yourself a great day.
Joe, sometimes people ae better off clearing up issues before they purchase! Enjoy your day!
Good morning Joe Petrowsky,
It is nice to have products out there for those that don't fall into the traditional package as long as they understand the risks and the extra costs. Always better to pay less but for some they don't care and want instant gratification..their choice!
Joe , oh my. I hope I don't run into anyone using these products because when they get into trouble.... It is, in my humble estimation, predatory lending. Again.
Many families will readily accept a higher mortgage interest rate for an opportunity to purchase a home.
As you say there are other options, and your the perfect one to suggest these...
Joe - I really home we don't have an increase in these. I would hate to se 2008 all over again.
Hi Joe Petrowsky The real question is "is that 7.5% loan better than waiting while prices "creep" up another 10%?" And they can still re-fi in two years if they listen to you about fixing their credit. It seems like a win-win.
Bill Roberts
Joe Petrowsky interesting that these loans are appearing again
Joe: Unfortunately many will get caught in this cycle and end up with bad loans as a result. As Kat pointed out, there aren't enough Joe's telling consumers to wait and get their finances in better shape.
Joe,
If the market is there, the resources appear for those who need them. It is important that those in need really educate themselves to the pros and cons as Bill Roberts expressed in his comment. A
Joe options are good, BUT when those options are used improperly as they were in the past, they create more harm than good.
Joe
With the state of the correct mortgage market . . . . A home buyer needs the help of a professional lender to guild them through the mortgage process.
Good luck and success.
Lou Ludiwg